For the March 2023 Spotlight US: “It’s time to talk about marketing effectiveness,” WARC’s Cathy Taylor talks with Pam Forbus, Senior VP/Chief Marketing at Pernod Ricard North America, about how to structure for, and measure, effectiveness.
This article is part of the March 2023 Spotlight US series, " It's time to talk about marketing effectiveness” Read more
You have a real passion for studying effectiveness. Do you think it is sufficiently paid attention to in the US, as opposed to the focus on media efficiency?
I think it's paid a lot of attention to. I don't think anyone wants to have ineffective work, but I'm not sure everyone is willing to invest in the measurement systems, because it can be expensive to do a whole system of measurement to ensure effectiveness.
I don't think people also are able to commit emotionally to making decisions that are based on the data. A lot of people say they want to be consumer-centric; they want to do really great marketing that's effective and drives the business, but I don't know that a lot of people put their effort or money or work into actually doing it.
And, to me, being consumer-centric is following the data. Because that data is consumer data. It's your sales data. It's your tracking data. It's your market research. All of that is consumer data that is leaving you breadcrumbs.
Where many companies go too far is in spending too much money in performance marketing. In some cases, the marketing teams will be different. You'll have the brand marketing team and the performance marketing team, and sometimes they don't even report to the same people, and you can see the disconnect. Having someone responsible for both building the brand, and building the business, can help put measurement systems in place to measure both and make sure that you're spending your marketing dollars to achieve both.
How were the teams structured at Pernod before you joined in 2020?
Pernod brought in a new North American CEO, my boss, Ann Mukherjee [Editor’s note: Mukherjee and Forbus worked together at PepsiCo], and then she brought in some other people, like me, to put in a more rigorous marketing system.
The great thing about this business is growth happens year-on-year, but the question always was: “Could growth have happened even more?” What do you look at there? You look at market share, and in fact market share had been declining year-on-year despite growth. Ann was brought in to put in a system that would drive market share gains. So, we'd had to accelerate growth, and drive business performance above market averages.
The first thing I did was build centers of excellence around cultural marketing, around media. I call it the marketing accelerator team, which is media, technology, our own in-house content studio, so we could keep that machine that accelerates brand plans up to speed on the latest technologies.
We also put in place – Ann did this before I came – a very rigorous consumer insights and analytics team that had also been lacking in the business. We made a commitment to put a data foundation in place for strategy, and a data foundation in place for measurement, and so we have a pretty rigorous marketing measurement system, pre-campaign, during-campaign, post-campaign. We are working to tie those metrics together to make those pre-campaign metrics even more predictive of post-metrics.
It's not inexpensive, but we believe the investment in people, time and the data measurement systems will pay back in spades. We have just gotten our marketing mix model back, and we've seen a 300% increase in the impact from our marketing efforts. That's huge.
When you're looking at pre-, during, post-campaign, everybody talks about optimization, and when they do, they're referring to it as an ROI tool, and not necessarily as effectiveness related.
ROI and effectiveness are related, but they are different. The definition of effectiveness is being effective at growing the business and growing the brand. During campaign, it's about can we get as much engagement? We make sure our ads are performing as best they can, so that our ROI will be better. Some of that is A/B testing. We do Kantar lift studies, to see: Are we moving the mark with the consumer around everything from purchase intent to brand attribution?
It's not all about just sales and purchase intent or sales lift. It can be that my objective is maybe a brand needs a turnaround, and I want to restage the brand to be more modern, so you can track that as an objective, and say the campaign is effective in doing that. That's step one. Now, does that translate to driving additional sales? That's the belief in the strategies, but you have to let it play out and measure.
Some of that pre-testing is really important in that regard. Is the marketing messaging, the selling message actually achieving your objective to change brand perceptions? Which will then also make someone interested in considering again? It's all the same metrics – awareness, consideration, intent – but ultimately, the marketing mix model, which measures your activity against sales lift, is the ultimate measure of if your campaign was effective or not.
What is the relationship among the analytics, finance and marketing teams at Pernod?
My career training is in analytics and insights and research, and I built many analytic models to measure effectiveness and impact of marketing. I've been a big proponent that analytics and insights should never report to marketing, but in most cases, it does report to the CMO. However, it's really difficult for that function to speak truth to power, to be objective, and be that truth teller when someone's got your career in their hands.
The truth is that insights and analytics supports more than marketing today. They support innovation, they support the finance team on pricing work. They can support operations, or even customer centers. We have insights and analytics reporting to a transformation officer. I lead marketing, and then of course, we have a CFO who leads finance. The three of us come together to look at the marketing mix modeling and understand what it's telling us and make shifts in our strategy or in our tactics. It's all done very transparently.
Now, we may, as a team, decide to ignore the data, because there's something different than what we were doing in the past. Say, we have a brand new campaign. It's testing much more strongly, so we're going to lean in and do something different, not move that money away from that brand. So, it’s not that we're blindly following the data; we're using the data as an input. Data doesn't make decisions – it informs those decisions.
You know that old saying from John Wanamaker about knowing half of the marketing works, but not knowing which half? Well, we've got tons of data to help us improve those odds. And that means we're probably at 80% knowledge. It's about probabilities, not perfection. If I make decisions, based on the data, more often than not, I'm going to actually have a better track record in the end.
But even though we got the structure, right, it has to be a mandate from the top. When someone – a function, or a person – is trying to do it from the middle, or from the bottom and influence the decisions, it's really difficult. But if you have that mandate from the top, your CEO, who's demanding a continuous improvement and return from marketing, and is also a champion of marketing, all functions are on board and working together to achieve the goal.
How can brands make their budget talks with the CFO more of a conversation and less of a pitch: “This is why I need more money.”
It helps to have the CEO philosophy. Their mandate is what the CFO and the CMO are all trying to march towards. So that helps – to know that this is something the CEO really supports that we have to solve together as a leadership team, as peers.
Marketers also have to be able to speak the language of business. This is a thing CMOs have gotten in trouble with because they get caught up in the language of marketing, and that just doesn't ring true to a CFO. We're so good at marketing. We're so good at understanding how to position things to this consumer target, or that consumer target. We've got to talk a different language when we're talking to the CFO than when we’re talking to the marketing function.
"I'm going to make you famous, let's do famous marketing," is not something the CFO cares about. "I'm going to drive growth, I'm going to make every dollar work harder this year, and here's my platform to do that" – that is something the CFO will stand up and listen to, and then you just have to be accountable.
What are the effectiveness metrics you really look at? ROI can be a part of it, but there are a lot of components, short-term, long-term. It’s a lot to unpack.
It is and it's kind of the Holy Grail. One thing we look at is sales-per-impression. That is an ROI measure, which does have efficiencies sometimes built in, but it's about impact – sales per impression, regardless of the cost of that impression. Cost per impression might bring your ROI down, but it might be worth it for what you were trying to accomplish at that moment.
Ultimately, the marketing or media mix models you have will help you measure impact from your activity, activity being impressions or GRPs. Whatever your activity is – a packaging change can be an activity – and in the model, it can pick up impact due to that activity and isolate it from pricing impacts or other factors. There are a lot of other impacts that can accelerate your growth or inhibit your growth, but models like these can isolate that. Then you really know what was due to marketing and marketing activities and that effectiveness measure is volume, not dollars, volume per activity. You're driving actual choice, which is the ultimate thing you're trying to impact. You can look at other things – household penetration and frequency – to diagnose where that growth came from.
But then you apply: How much money did I make? What did it cost for those activities? Is that a good investment? What was causing the ROI decline? Is it because I was driving a product that has a really low margin? That can affect your ROI. Was I buying really expensive media? That can drive your ROI. You have to unpack the effectiveness versus ROI.
You can do the same thing and get a better ROI just by looking at that, but there are other objectives marketing has, like ensuring the longer-term health of the brand, strength of the brand so that you're not milking the brand and doing sales-promotion type stuff to prop up. So, what are those metrics around brand health? How do you measure brand equity? I have a lot of conversations with a lot of smart people, and we've come down to: the best measure of brand equity is price elasticity; is my brand worth paying more for? If your price elasticity is growing year on year, that's a sign of increased brand, equity and strength.
WARC has written about share of search as a predictor of market share. We are definitely adopting that as a metric; That is a leading indicator before you've done your marketing mix model that your activities are generating some interest, and so your marketing campaign is working, and because it's predictive of share gains, then that also says it's strong within its category. There are lots of others that we track, but they are more diagnostic, awareness, consideration, stuff like that.
What would you like to see happen so that marketing is valued to the degree it should be? In times like this, marketing gets pulled back, despite all the data saying that's the wrong thing to do.
I long for both marketing, and the insights and analytics function to mature and become true functions, like the finance function, like operations. You go back to the 80s and the quality movement in manufacturing. What is it, in our functions, that can drive that kind of credibility and performance? I think there's a credibility issue in some cases in some companies, that keeps marketing from being fully at the table. I've just had success by ensuring we have the right data and metrics in place and a partnership with finance. In fact, when I first started in the space, I actually handed over the market mix model tool to be owned by finance, because I was in insights, and I was part of marketing. And I felt that objectivity, to work with marketing, side-by-side would build a stronger relationship. And it did.
They spent days digging into the model and were fascinated by it. It's not a typical tool you learn in finance, but that partnership is really important because it drives credibility and accountability. And until I think marketing, CMOs, companies, put systems in place to enable accountability, visibility, transparency, there will be a tendency for the function to be sometimes led by charismatic hero CMOs that can do the job for a few years.
How is your marketing budget holding up?
We're going into tight cost-cutting, because of inflation, cost of goods, glass, all kinds of stuff, but we're not pulling back on marketing because we know it drives growth, so we are investing more in marketing next year and looking for cost savings in other places.
There are a lot of CMO meetings where the only thing people are talking about is how do I fight for my budget? I don't have to fight for my budget. I'm getting more budget next year because I have a track record of showing that my marketing dollars drive growth.